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        <li class="layui-this"><i class='fa fa-edit'></i> Revenue Narrative</li>
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            <b>Scroll down to complete all parts of this task.</b><br/><br/>

            Your CPA firm is planning the Year 4 audit of Tall Towers LLC, a calendar-year-end nonissuer.  An audit staff member has updated the narrative describing Tall Tower's accounting system and internal controls related to revenues and receivables and has identified significant accounts, assertions and tests of control.<br>
            <br>

            As the audit senior for the engagement, it is your responsibility to review and revise the narrative, as needed.  Use the additional client information in the Exhibits tab to determine whether revisions are needed.<br>
            <br>

            To revise the narrative, click on each segment of underlined text below and select the needed correction, if any, from the list provided.  If the underlined text is already correct in the context of the document, select [Original text] from the list.  If removal of the entire underlined text is the best revision to the narrative as a whole, select [Delete text] from the list.<br>
            <br>
            <hr/>
            <br/>
            <strong>Tall Towers LLC<br/>Revenue and Receivables Narrative and Testing Plan<br/>12/31/Year 4</strong>

            <br/>
            <br/>

            <strong>Purpose:</strong>
            To summarize the revenue and receivables key processes and controls, and document planned audit procedures for each related significant account.<br/><br/>

            Yardi is the accounting software used by Tall Towers for operations and accounting.<br/><br/>
            <strong><u>Leasing Process</u></strong><br/>


            To begin the lease approval process, potential residents fill out an online application and pay a $45 online background-check fee to a third party, CheckFirst, which provides a credit rating to the property within 24 hours.  The online application prompts the applicant to pay a $300 security deposit and a $300 nonrefundable administrative leasing fee.  Additionally, Tall Towers requires residents to have an income-to-rent ratio of greater than three, which must be verified by pay stub or offer letter within 48 hours.  The security deposit and leasing fee are refunded upon rejection of the application.<br/><br/>

            The Property Accountant reconciles the balance on the Security Deposit Detail Report with the GL on the last day of the month prior to transferring cash to a restricted bank account.  The cash account is reconciled on a monthly basis by the Property Accountant, which is then reviewed by the Director of Accounting.<br/><br/>

            <strong><em>Leasing Process—Selected Significant Accounts, Assertions, and Testing</em></strong>

            <ul style="margin-left:40px"><br/>
                <li>Security Deposit Liability<br/>
                    <ul style="margin-left:40px"><br/>
                        <li>Completeness—Obtain Security Deposit Detail Report, foot, and trace total balance per report to the security deposit liability account on the Trial Balance. &nbsp;<span class="parent mbg {if condition='isset($log.1)'}xbg{/if}">{if condition='isset($log.1) && $log.1.topic_v eq 2'}<s>{/if}To test completeness of the security deposit liability account balance, select a sample of residents from the Security Deposit Detail and verify they are included on the Rent Roll.{if condition='isset($log.1) && $log.1.topic_v eq 2'}</s>{/if}</span>
                            <form class="layui-form" id='form' action="{:url('index/form')}" method="post" style="display:none;">
                                <blockquote class="layui-elem-quote layui-quote-nm">
                                    <b class="b">Choose an option below:</b><hr>
                                    <div class="layui-form-item">
                                        <div class="layui-input-block">
                                            
                                            <input type="radio" name="topic_t[1]" value="1" {if condition='isset($log.1) && $log.1.topic_v eq 1'}checked{/if} title="<em>[Original text]</em> <em class='span'> To test completeness of the security deposit liability account balance, select a sample of residents from the Revenue and Occupancy by Month Report and verify they are included on the Trial Balance.</em>" ><br/>
                                                <input type="radio" name="topic_t[1]" value="2" {if condition='isset($log.1) && $log.1.topic_v eq 2'}checked{/if} title="[Delete Text]"><br/>
                                                <input type="radio" name="topic_t[1]" value="3" {if condition='isset($log.1) && $log.1.topic_v eq 3'}checked{/if} title="<em class='span'>To test completeness of the security deposit liability account balance, select a sample of residents from the Revenue and Occupancy by Month Report and verify they are included on the Security Deposit Detail.</em>" ><br/>
                                                    <input type="radio" name="topic_t[1]" value="4" {if condition='isset($log.1) && $log.1.topic_v eq 4'}checked{/if} title="<em class='span'>To test completeness of the security deposit liability account balance, select a sample of residents from the Rent Roll and verify they are included on the Security Deposit Detail.</em>"><br/>
                                                        <input type="radio" name="topic_t[1]" value="5" {if condition='isset($log.1) && $log.1.topic_v eq 5'}checked{/if} title="<em class='span'>To test completeness of the security deposit liability account balance, select a sample of residents from the Security Deposit Detail and verify they are included on the Rent Roll.</em>" ><br/>
                                                            </div>
                                                            </div>
                                                            <div class="layui-btn-group">
                                                                <a class="layui-btn layui-btn-disabled res">Reset</a>
                                                                <a class="layui-btn cancel layui-btn-warm" >Cancel</a>
                                                                <button class="layui-btn layui-btn-normal {if condition='!isset($log.1)'}layui-btn-disabled{/if} submit">Accept</button>
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                                                            </li>
                                                            </ul>
                                                            </li>
                                                            </ul>
                                                            <br/>
                                                            <strong><u>Monthly Recurring Revenue</u></strong><br/>


                                                            Revenue recognition occurs when the resident officially moves in, signs the lease, and takes possession of the apartment. During the move-in, the Property Manager (PM) will go through the resident information entered into Yardi and verify accuracy by comparing to the signed lease agreement.  Rent and any other charges are manually prorated and posted to the resident ledger by the PM and rent for the first month is due from the resident upon move-in.  The resident will always pay for the first prorated month.  Any rent concessions, such as free rent as an incentive to move in, are applied to the first full month of rent.  As most leases do not exceed one year, straight-line calculations are not required.

                                                            <br/><br/>
                                                            Yardi will automatically post all rent and other recurring income charges on the first of the month.  As rent charges are per the lease agreement, individual invoices are not created or sent to residents.
                                                            <br/><br/>
                                                            <strong><em>Revenue Recognition—Selected Significant Accounts, Assertions, and Testing</em></strong>

                                                            <ul style="margin-left:40px"><br/>
                                                                <li>Accounts Receivable<br/>
                                                                    <ul style="margin-left:40px"><br/>
                                                                        <li>Existence—<span class="parent mbg {if condition='isset($log.2)'}xbg{/if}">{if condition='isset($log.1) && $log.2.topic_v eq 2'}<s>{/if}AR confirmations will be negative confirmations because the balances are small, low risk, and customer attention is expected.{if condition='isset($log.2) && $log.2.topic_v eq 2'}</s>{/if}</span>
                                                                            <form class="layui-form" id='form' action="{:url('index/form')}" method="post" style="display:none;">
                                                                                <blockquote class="layui-elem-quote layui-quote-nm">
                                                                                    <b class="b">Choose an option below:</b><hr>
                                                                                    <div class="layui-form-item">
                                                                                        <div class="layui-input-block">
                                                                                            
                                                                                            <input type="radio" name="topic_t[2]" value="1" {if condition='isset($log.2) && $log.2.topic_v eq 1'}checked{/if} title="<em>[Original text]</em> <em class='span'> AR confirmations will be negative confirmations because the balances are small, low risk, and customer attention is expected.</em>" ><br/>
                                                                                                <input type="radio" name="topic_t[2]" value="2" {if condition='isset($log.2) && $log.2.topic_v eq 2'}checked{/if} title="[Delete Text]"><br/>
                                                                                                <input type="radio" name="topic_t[2]" value="3" {if condition='isset($log.2) && $log.2.topic_v eq 3'}checked{/if} title="<em class='span'>AR will be tested by selecting a sample of residents from the AR aging and vouching the amounts due to the Cash Receipt Batch and to the bank statement.</em>" ><br/>
                                                                                                    <input type="radio" name="topic_t[2]" value="4" {if condition='isset($log.2) && $log.2.topic_v eq 4'}checked{/if} title="<em class='span'>AR confirmations will be positive confirmations because the balances are small, low risk and customer attention is expected.</em>"><br/>
                                                                                                        <input type="radio" name="topic_t[2]" value="5" {if condition='isset($log.2) && $log.2.topic_v eq 5'}checked{/if} title="<em class='span'>AR confirmations will not be sent because the AR balance is immaterial.</em>" ><br/>
                                                                                                            </div>
                                                                                                            </div>
                                                                                                            <div class="layui-btn-group">
                                                                                                                <a class="layui-btn layui-btn-disabled res">Reset</a>
                                                                                                                <a class="layui-btn cancel layui-btn-warm" >Cancel</a>
                                                                                                                <button class="layui-btn layui-btn-normal {if condition='!isset($log.2)'}layui-btn-disabled{/if} submit">Accept</button>
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                                                                                                            </blockquote>
                                                                                                            </form></li>
                                                                                                            </ul>
                                                                                                            </li><br/>
                                                                                                            <li>Revenue Accounts<br/>
                                                                                                                <ul style="margin-left:40px"><br/>
                                                                                                                    <li>Cutoff—Obtain GL detail for all revenue accounts, foot, and trace total to Trial Balance. &nbsp;Scan December GL detail for revenue posted after 12/1/15 and investigate transactions.&nbsp; <span class="parent mbg {if condition='isset($log.3)'}xbg{/if}">{if condition='isset($log.3) && $log.3.topic_v eq 2'}<s>{/if}Note that any revenue posted after December 1 could be an indication of fraud and requires discussion with audit partner.{if condition='isset($log.3) && $log.3.topic_v eq 2'}</s>{/if}</span>
                                                                                                                        <form class="layui-form" id='form' action="{:url('index/form')}" method="post" style="display:none;">
                                                                                                                            <blockquote class="layui-elem-quote layui-quote-nm">
                                                                                                                                <b class="b">Choose an option below:</b><hr>
                                                                                                                                <div class="layui-form-item">
                                                                                                                                    <div class="layui-input-block">
                                                                                                                                        
                                                                                                                                        <input type="radio" name="topic_t[3]" value="1" {if condition='isset($log.3) && $log.3.topic_v eq 1'}checked{/if} title="<em>[Original text]</em> <em class='span'> Note that rents posted after December 1 will be automatically prorated.</em>" ><br/>
                                                                                                                                            <input type="radio" name="topic_t[3]" value="2" {if condition='isset($log.3) && $log.3.topic_v eq 2'}checked{/if} title="[Delete Text]"><br/>
                                                                                                                                            <input type="radio" name="topic_t[3]" value="3" {if condition='isset($log.3) && $log.3.topic_v eq 3'}checked{/if} title="<em class='span'>Note that residents who move in after December 1 will always have manually posted rent charges and can be recalculated using the Rent Roll.</em>" ><br/>
                                                                                                                                                <input type="radio" name="topic_t[3]" value="4" {if condition='isset($log.3) && $log.3.topic_v eq 4'}checked{/if} title="<em class='span'>Note that any revenue posted after December 1 could be an indication of fraud and requires discussion with audit partner.</em>"><br/>
                                                                                                                                                    <input type="radio" name="topic_t[3]" value="5" {if condition='isset($log.3) && $log.3.topic_v eq 5'}checked{/if} title="<em class='span'>Note that revenue will be posted after December 1 if the amount is prepaid.</em>" ><br/>
                                                                                                                                                        </div>
                                                                                                                                                        </div>
                                                                                                                                                        <div class="layui-btn-group">
                                                                                                                                                            <a class="layui-btn layui-btn-disabled res">Reset</a>
                                                                                                                                                            <a class="layui-btn cancel layui-btn-warm" >Cancel</a>
                                                                                                                                                            <button class="layui-btn layui-btn-normal {if condition='!isset($log.3)'}layui-btn-disabled{/if} submit">Accept</button>
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                                                                                                                                                        </form></li>
                                                                                                                                                        <br/>
                                                                                                                                                        <li>Valuation, Allocation, and Accuracy—Analytically review revenue by month by comparing revenue per month to occupancy per month. &nbsp;<span class="parent mbg {if condition='isset($log.4)'}xbg{/if}">{if condition='isset($log.4) && $log.4.topic_v eq 2'}<s>{/if}From local trends, we would expect to see an upward trend in occupancy with the sharpest increase in the summer.{if condition='isset($log.4) && $log.4.topic_v eq 2'}</s>{/if}</span>
                                                                                                                                                            <form class="layui-form" id='form' action="{:url('index/form')}" method="post" style="display:none;">
                                                                                                                                                                <blockquote class="layui-elem-quote layui-quote-nm">
                                                                                                                                                                    <b class="b">Choose an option below:</b><hr>
                                                                                                                                                                    <div class="layui-form-item">
                                                                                                                                                                        <div class="layui-input-block">
                                                                                                                                                                            
                                                                                                                                                                            <input type="radio" name="topic_t[4]" value="1" {if condition='isset($log.4) && $log.4.topic_v eq 1'}checked{/if} title="<em>[Original text]</em> <em class='span'> From local trends, we would expect to see an upward trend in occupancy with the sharpest increase in the summer.</em>" ><br/>
                                                                                                                                                                                <input type="radio" name="topic_t[4]" value="2" {if condition='isset($log.4) && $log.4.topic_v eq 2'}checked{/if} title="[Delete Text]"><br/>
                                                                                                                                                                                <input type="radio" name="topic_t[4]" value="3" {if condition='isset($log.4) && $log.4.topic_v eq 3'}checked{/if} title="<em class='span'>From local trends, we would expect to see a downward trend in occupancy with the sharpest decrease in the summer.</em>" ><br/>
                                                                                                                                                                                    <input type="radio" name="topic_t[4]" value="4" {if condition='isset($log.4) && $log.4.topic_v eq 4'}checked{/if} title="<em class='span'>From local trends, we would expect to see a downward trend in occupancy until the summer with a sharp increase starting in August.</em>"><br/>
                                                                                                                                                                                        <input type="radio" name="topic_t[4]" value="5" {if condition='isset($log.4) && $log.4.topic_v eq 5'}checked{/if} title="<em class='span'>From local trends, we would expect to see inconsistent ups and downs in occupancy throughout the year.</em>" ><br/>
                                                                                                                                                                                            </div>
                                                                                                                                                                                            </div>
                                                                                                                                                                                            <div class="layui-btn-group">
                                                                                                                                                                                                <a class="layui-btn layui-btn-disabled res">Reset</a>
                                                                                                                                                                                                <a class="layui-btn cancel layui-btn-warm" >Cancel</a>
                                                                                                                                                                                                <button class="layui-btn layui-btn-normal {if condition='!isset($log.4)'}layui-btn-disabled{/if} submit">Accept</button>
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                                                                                                                                                                                            <br/>

                                                                                                                                                                                            <strong><u>Cash Collections</u></strong><br>
                                                                                                                                                                                            Rent charges are generated on the first day of the month. &nbsp;Rent is due on the first but residents have a five-day grace period before a late fee is automatically charged.<br>
                                                                                                                                                                                            &nbsp;<br>
                                                                                                                                                                                            Residents can pay by check to the leasing office or through their resident portal. &nbsp;Checks collected at the property are recorded in the cash receipts journal and deposited by the PM primarily using a check scanner. &nbsp;Bank reconciliations are performed by the Property Accountant each month to reconcile cash balances.<br>
                                                                                                                                                                                            &nbsp;<br>
                                                                                                                                                                                            If a resident pays rent before the first, the cash receipt is automatically recorded as prepaid rent. &nbsp;On the first of the month when rent charges are posted, the prepaids are automatically applied against tenant receivables.<br>
                                                                                                                                                                                            &nbsp;<br>
                                                                                                                                                                                            During the month, the PM will verify accuracy of prepaid rents, security deposits, late fees, and receivables balances. &nbsp;The Assistant Property Manager is responsible for collecting outstanding account balances and performs a daily review of outstanding accounts receivable.<br>
                                                                                                                                                                                            &nbsp;<br>
                                                                                                                                                                                            <strong><em>Cash Collections Process—Selected Significant Accounts, Assertions, and Testing</em></strong>

                                                                                                                                                                                            <ul style="margin-left:40px"><br/>
                                                                                                                                                                                                <li>Cash Receipts<br/>
                                                                                                                                                                                                    <ul style="margin-left:40px"><br/>
                                                                                                                                                                                                        <li>Occurrence—<span class="parent mbg {if condition='isset($log.5)'}xbg{/if}">{if condition='isset($log.5) && $log.5.topic_v eq 2'}<s>{/if}Select a sample of cash receipts from bank statements and trace back to the resident ledger.{if condition='isset($log.5) && $log.5.topic_v eq 2'}</s>{/if}</span>
                                                                                                                                                                                                        <form class="layui-form" id='form' action="{:url('index/form')}" method="post" style="display:none;">
                                                                                                                                                                                                        <blockquote class="layui-elem-quote layui-quote-nm">
                                                                                                                                                                                                        <b class="b">Choose an option below:</b><hr>
                                                                                                                                                                                                        <div class="layui-form-item">
                                                                                                                                                                                                        <div class="layui-input-block">
                                                                                                                                                                                                        
                                                                                                                                                                                                        <input type="radio" name="topic_t[5]" value="1" {if condition='isset($log.5) && $log.5.topic_v eq 1'}checked{/if} title="<em>[Original text]</em> <em class='span'> Select a sample of cash receipts from bank statements and trace back to the resident ledger.</em>" ><br/>
                                                                                                                                                                                                        <input type="radio" name="topic_t[5]" value="2" {if condition='isset($log.5) && $log.5.topic_v eq 2'}checked{/if} title="[Delete Text]"><br/>
                                                                                                                                                                                                        <input type="radio" name="topic_t[5]" value="3" {if condition='isset($log.5) && $log.5.topic_v eq 3'}checked{/if} title="<em class='span'>Select a sample of cash receipts from bank statements and trace back to the cash receipts journal.</em>" ><br/>
                                                                                                                                                                                                        <input type="radio" name="topic_t[5]" value="4" {if condition='isset($log.5) && $log.5.topic_v eq 4'}checked{/if} title="<em class='span'>Select a sample of cash receipts in the cash receipts journal and vouch to the bank statements.</em>"><br/>
                                                                                                                                                                                                        <input type="radio" name="topic_t[5]" value="5" {if condition='isset($log.5) && $log.5.topic_v eq 5'}checked{/if} title="<em class='span'>Compare the dates for recording a sample of cash receipts in the cash receipts journal to the dates the cash was deposited in the bank.</em>" ><br/>
                                                                                                                                                                                                        </div>
                                                                                                                                                                                                        </div>
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                                                                                                                                                                                                        <a class="layui-btn layui-btn-disabled res">Reset</a>
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                                                                                                                                                                                                    <button class="layui-btn" data-link="/static/js/pdf/viewer.html?file={:urlencode($Request.domain.'/static/pdf/2-1.pdf')}">2015 Trial Balance</button>
                                                                                                                                                                                                    <button class="layui-btn" data-link="/static/js/pdf/viewer.html?file={:urlencode($Request.domain.'/static/pdf/2-2.pdf')}">AR Aging 12-31-15</button>
                                                                                                                                                                                                    <button class="layui-btn" data-link="/static/js/pdf/viewer.html?file={:urlencode($Request.domain.'/static/pdf/2-3.pdf')}">Q1 2015 BOD Meeting Minutes</button>
                                                                                                                                                                                                    <button class="layui-btn" data-link="/static/js/pdf/viewer.html?file={:urlencode($Request.domain.'/static/pdf/2-4.pdf')}">Rent Roll December 2015</button>
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                                                                                                                                                                                                <p class='pdf_title'>2015 Trial Balance</p>

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                                                                                                                                                                                                        <strong>Pop-up 1:</strong><br>
                                                                                                                                                                                                        <strong><u>Leasing Process—Security Deposit Liability—Completeness</u></strong><br>
                                                                                                                                                                                                        <span style="color:#0000ff">To test completeness of the security deposit liability account balance, select a sample of residents from the Rent Roll and verify they are included on the Security Deposit Detail.</span><br>
                                                                                                                                                                                                        &nbsp;<br>
                                                                                                                                                                                                        To test the completeness of the security deposit detail, we choose a sample from the Rent Roll, which lists residents by unit/name, and ensure inclusion on what we are testing, which is the Security Deposit Detail report (not the Trial Balance). &nbsp;We would not select the sample from the Revenue and Occupancy by Month report because it does not include resident specific data. &nbsp;Selecting a sample of residents from the Security Deposit Detail and verifying that they are included on the Rent Roll would test the completeness of the Rent Roll, not the completeness of the Security Deposit Detail.<br>
                                                                                                                                                                                                        &nbsp;<br>
                                                                                                                                                                                                        &nbsp;<br>
                                                                                                                                                                                                        <strong>Pop-up 2:</strong><br>
                                                                                                                                                                                                        <strong><u>Revenue Recognition—Accounts Receivable—Existence</u></strong><br>
                                                                                                                                                                                                        <span style="color:#0000ff">AR confirmations will not be sent because the AR balance is immaterial.</span><br>
                                                                                                                                                                                                        &nbsp;<br>
                                                                                                                                                                                                        Confirmation of AR is a required generally accepted auditing procedure that must be performed unless: 1) receivables are immaterial; 2) confirmation would be ineffective; or 3) inherent and control risks are very low.&nbsp; Therefore, confirmations will not be sent because the AR balance of $21,530 is immaterial in relation to the total assets of more than $50 million.&nbsp; Because the balance is immaterial, alternative procedures are not required.<br>
                                                                                                                                                                                                        &nbsp;<br>
                                                                                                                                                                                                        &nbsp;<br>
                                                                                                                                                                                                        <strong>Pop-up 3: </strong><br>
                                                                                                                                                                                                        <strong><u>Revenue Recognition—Revenue Accounts—Cutoff</u></strong><br>
                                                                                                                                                                                                        <span style="color:#0000ff">Note that residents who move in after December 1 will always have manually posted rent charges and can be recalculated using the Rent Roll.</span><br>
                                                                                                                                                                                                        &nbsp;<br>
                                                                                                                                                                                                        As stated in the narrative, rents for residents who move in after December 1 are manually (not automatically) prorated and posted. &nbsp;This is not an indication of fraud. &nbsp;These amounts can be recalculated using the Rent Roll, which shows the monthly rent for each tenant and the tenant move-in date. &nbsp;According to the narrative, prepaid revenue is automatically recognized on the first of the month when rent charges are posted.<br>
                                                                                                                                                                                                        &nbsp;<br>
                                                                                                                                                                                                        &nbsp;<br>
                                                                                                                                                                                                        <strong>Pop-up 4:</strong><br>
                                                                                                                                                                                                        <strong><u>Revenue Recognition—Revenue Accounts—Valuation, Allocation, and Accuracy</u></strong><br>
                                                                                                                                                                                                        <span style="color:#0000ff">From local trends, we would expect to see a downward trend in occupancy with the sharpest decrease in the summer.</span><br>
                                                                                                                                                                                                        &nbsp;<br>
                                                                                                                                                                                                        According to the May Board of Directors meeting minutes, local trends indicated that occupancy rates were expected to decrease with excess supply highest in the summer.<br>
                                                                                                                                                                                                        &nbsp;<br>
                                                                                                                                                                                                        &nbsp;<br>
                                                                                                                                                                                                        <strong>Pop-up 5:</strong><br>
                                                                                                                                                                                                        <strong><u>Cash Collections Process—Cash Receipts—Occurrence</u></strong><br>
                                                                                                                                                                                                        <span style="color:#0000ff">Select a sample of cash receipts in the cash receipts journal and vouch to the bank statements.</span><br>
                                                                                                                                                                                                        &nbsp;<br>
                                                                                                                                                                                                        Selecting a sample of cash receipts in the cash receipts journal and vouching to the bank statement is a test of the occurrence of the cash receipt transactions.&nbsp; If cash receipts were recorded in the journal but did not actually occur or were not deposited, this would be revealed if the cash receipt did not appear in the bank statement.&nbsp; Selecting a sample of cash receipts from the bank statements and tracing them to the cash receipts journal/resident ledger would be a test of the completeness of the cash receipts journal/resident ledger. &nbsp;Comparing the dates for recording a sample of cash receipts in the cash receipts journal to the dates the cash was deposited in the bank is a test of cutoff.
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